Data as currency: how the relationship between consumers and retailers online is changing in the digital market

The digital world moves apace every day, opening up new challenges. The speed of digital change means consumer protection law often lags behind the development of new technology. However, the consumer movement is in a good position to effect change precisely because most online models now rely on consumers’ data. It is not feasible for any online business to function without in-depth knowledge of its customers’ habits and preferences. The once unbalanced relationship between the trader and the consumer may be about to shift.

Data is currency

Because data is currency, online platforms and retail websites should want to engage more fairly with their customers. Their custom not only fuels direct revenues by buying goods and services, but their data also enables the platforms to a) tailor offering and sell more than they would have otherwise managed and b) use the data to generate revenue streams by renting or selling the data gathered to aggregators. These can therefore be powerful arguments to engage with tech companies and force a change, if consumer demand can be swayed away from suppliers that do not provide consumers with a high level of protection.

Yet we still see a real imbalance, mostly due to information asymmetry and the fact that the technology has somewhat run away from human control. Algorithms can be so complex that even data collectors can be at odds with explaining exactly how the data gathered is being used to build profiles. Even the simplest of technologies can empower traders to discriminate between consumers. Suppliers are able to collect data on consumers and charge different prices, making use of their preferences. If consumers want to regain control, we must educate them as to the risks the technology poses, and/or legislate to avoid extreme manipulations of data to the disadvantage of consumers.

Newer technologies such as blockchain may disrupt the current digital market and enable consumers to keep hold of their data, as well as enable them to transact safely and directly with one another. It has the potential to underpin the next level of the sharing economy, where intermediaries are no longer required to process financial transactions. Blockchain technology is capable of ensuring high levels of security through a decentralised network. It also enables reliable authentication of the payment source.

Openbazaar is one example of how technology can enable consumer transactions without the fees that are normally reserved for the intermediary. Yet the role and liabilities of such platforms are still unclear and require attention. Unfortunately, to date, consumer rights are largely ignored on these platforms. This is due to the fact that sellers come from multiple jurisdictions, all with varying levels of protection. It is also because the platform template itself does not offer the possibility to document and provide the information normally required in a typical e-commerce transaction (at least under European law).

Resolving problems that cut across borders

This leads us to perhaps one of the most pressing issues to empower consumers worldwide: dispute resolution in the digital sphere. Without enforcement, private or public consumer protection is not worth the paper it is written on. It is therefore essential that consumers can seek and obtain redress where required. Knowledge of the available consumer rights is a first hurdle to clear. A survey conducted in the European Union showed that most consumers making digital purchases were unaware of their rights. In addition, cross-border dispute resolution, still in its infancy, does not yet allow effective and cheap methods for consumers to return goods and get their money back in a timely fashion and at a cost that is not prohibitive. Unfortunately, when consumers buy cross borders, they will be presented with a number of obstacles. This may include:

• Finding out that their contract is subject to a foreign law
• Potentially having a foreign court competent to hear the dispute
• The contract being subject to an arbitration clause that prevents them from seeking redress in a state sponsored forum
  
  

In Europe, these inconveniences are, in theory, somewhat avoided. This is thanks to regulations, which favour the law of the consumer’s domicile. Additionally, a prohibition on unfair terms applies to arbitration and jurisdictions clauses. However, trust in Alternative Dispute Resolution (ADR) and courts by European consumers remains problematic. The Consumer Conditions Scoreboard also notes that no clear improvement has been seen since 2010 in the level of trust consumers have in out-of-court dispute resolution, a fact that is extremely troublesome. Meanwhile the volume of complaints received by the European Consumer Centres Network is rising year-on-year. And yet, one of the main reasons for not complaining about e-commerce purchases is the assumption that the problem encountered is unlikely to get a satisfactory solution.

Access to justice is an international preoccupation. An OECD report from 2006 highlights the importance of cross-border dispute resolution mechanisms. More recently, UNCITRAL started looking into viable ways to resolve disputes and is developing procedural rules on online dispute resolution (ODR). Its latest output is a draft outcome document, reflecting elements and principles of an ODR process. This instrument is aligned to the European ODR model, although at first glance not as protective, bringing us back to one of our first points: the difficulty in protecting consumers in a world where levels of protection and development of technology are so disparate.

While the size of the task ahead is immense, the rise of digital marketplaces means businesses rely on consumers more than ever before and so it is with optimism that I conclude marketplaces can become fairer, and we can all feel the benefits of a better digital world.